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The Community 
Resource Kit 



Guidance for people setting up and 
running community organisations 





www.dia.govt.nz 



Te Tari Taiwhenua 



Section 7 

Financial management 



THE COMMUNITY RESOURCE KIT 



Section 1 


Getting started 


Section 2 


Planning 


Section 3 


Organisational structures 


Section 4 


Governance 


Section 5 


Policies 


Section 6 


Meetings 


Section 7 


Financial management 


Section 8 


Record-keeping 


Section 9 


Raising funds 


Section 10: Employment 


Section 1 1 : Communications 


Section 12: Information technology 



CONTENTS (SECTION 7) 



3 



Introduction 

Policies and procedures 
Uses of financial information 
Key financial terms 
Acknowledgements 

Financial planning 

Financial plan 

Budget 

Cash flow forecast 

Financial record-keeping 

Treasurer's roles and responsibilities 

Checklist of treasurer's overall duties 
Checklist for making payments 
Financial records 
Receipt book 

Filing income invoices and paid accounts 
Petty cash book 
Petty cash checklist 
Sample petty cash book 



6 



Computerised accounting systems 

Checklist for a computerised accounting system 

Chart of accounts 

Sample chart of accounts 

Opening balances 

Names file 

Processing transactions 

GST processing 

Sample GST invoice 

Bank reconciliation 

Sample monthly bank reconciliation 

Cash book accounting system 

Cash book checklist 
Sample cash book 



13 Financial reporting 

Monthly reporting 

Financial reports 

Sample monthly financial report 

Other reports 

Keeping track of grants 

Sample grants register 

Sample schedule of expenditure against grants tracking 
Year-end financial statements 
The year end process 
Year-end checklist 
Annual financial accounts 
Auditing 

22 Annual returns and financial statements 

Registered with the Charities Commission 
Not registered with the Charities Commission 

Incorporated societies 
Charitable trusts 

23 Tax matters 

Checklist of tax responsibilities 
Getting an IRD number 
Income tax obligations 

Exemptions from income tax 
Resident withholding tax (RWT) 

Employment-related tax obligations 

Registering as an employer 

Deductions 

PAYE 

Student loan and child support deductions 

Fringe benefit tax (FBT) 

KiwiSaver 

Payroll giving 

Goods and services tax (GST) 

Taxable activities 
Who must register? 
Registering for GST 
GST obligations 
Checklist of GST obligations 
Completing your GST return 

30 Accident Compensation Corporation (ACC) 

ACC employers' levy 
ACC earners' levy 



30 



Where to go for more information 

Online resources 
Other resources 



Introduction 

Financial management is managing money received or spent. Doing it well is essential to 
any community group's survival. Financial management has three basic parts to it: 

1 . planning (on how to raise and spend money) 

2. record-keeping 

3. reporting. 

This section covers these three aspects of financial management and provides guidance 
and samples of financial documents for organisations using either a computer accounting 
package or a cash book accounting system (using either a manual or computer 
spreadsheet). In addition to financial management, the section also covers tax matters and 
details on the requirements for filing annual returns and financial statements. 

Policies and procedures 

In managing your organisation's finances, you should have some set policies and 
procedures that must be followed when it comes to looking after money. This will make it 
easier to keep track of the money that comes into the organisation and how it is spent. 

Some areas to cover in your policies and procedures include: 

Cash receipting: 

* writing receipts for cash received - such as donations, membership fees, etc. 
banking all money received (i.e. don't use it to pay for costs) 

banking cash as soon as possible after it is received. 

Making payments: 

pay for all purchases and expenses (except for small, petty cash items) by cheque, direct 
credit, or Internet banking so there is a record of the transaction 

• have a system for approving payments 

only pay a bill when an invoice has been received 

have designated cheque signatories and two signatures on every cheque (or two authorising 

codes for internet banking) 

have a system for filing invoices 

have a petty cash system for small payments - with procedures to balance and reimburse it. 



Tip: For more information on financial policies and controls for your group, visit the 
New Zealand Institute of Chartered Accountants website: http://www.nzica.com/AM/ 
Template.cfm?Section=Sector_lssues4 . 



Uses of financial information 

Financial information can be used by management, workers, Inland Revenue, the Charities 
Commission, funding agencies and the general public. It is used to assess: 

• the organisation's financial position 

* the organisation's performance 

that the finances are being used to meet the organisation's objectives 

that results are cost-effective 

all legal requirements are being met 

the extent to which planning for the future is being undertaken. 



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Section 7: Financial management 1 



Key financial terms 

Four key terms used in financial reports are: 

assets - what the business owns or monies due to it e.g. cash, equipment, accounts 

receivable, inventory 

liabilities - what the business owes e.g. bank overdraft, creditors, loans, staff leave not yet 

taken 

expenses - the costs incurred by running your business e.g. wages, rent, phones 

revenue or income - what you earn e.g. grants, membership subs. 

For more financial terms please see the glossary. 

Acknowledgements 

The three main sources of information for this section were: Financial Training for Not-For- 
Profit Community Groups developed for the Auckland Council; training supplied to not-for- 
profit groups by the Community Accounts Mentoring Service (CAMS); Inland Revenue and 
Charities Commission material. 

Please note: the information in this section is not intended to take the place of legal advice. 
Laws can change regularly. The authors of this publication take no responsibility for the 
results of any action taken on the basis of information contained in this section or for any 
errors or omissions. Readers should talk to a lawyer or contact their local Community Law 
Centre (http://www.communitylaw.org.nz/) for further legal advice. 

Financial planning 

Financial plan 

A financial plan shows what your total expenditure is likely to be and when money will be 
needed. A financial plan may include a: 

budget - forecasting income and expenditure for the next 1 2 or more months 

cash flow forecast - a monthly breakdown of money coming in and going out (receipts and 

payments), including the opening and closing bank account balances. 

Budget 

A budget can be prepared in a spreadsheet, either electronically or manually. The treasurer 
usually has the key role in preparing the budget, but he or she will need to work closely 
with the other members of the organisation. Once the budget has been approved, it should 
be added to your accounting system to ensure the organisation can compare it against 
actual income and expenses. If you use a cash book accounting system (either a computer 
spreadsheet or a manual cash book), it is still important to compare the actual financial 
performance with the budget - see Monthly reporting later in this section. 

To prepare a budget: 

start with your actual income and expenditure from the previous year (or two years if this is 

available) - new groups will have to start with their best guess of what to expect 

add your likely payments and potential income for the coming year 

adjust and modify until you have a realistic and reasonable budget 

get the budget approved by your management committee or governing body. 



Community Resource Kit Section 7: Financial management 2 



Tip: You may want to start with your planned expenses to calculate the total cost. You 
can then focus on what income and funding you'll need to cover that total cost. 



Cash flow forecast 

It is important to do some cash flow forecasting throughout the year so you can predict 
when there may be increases and decreases in your income. Planning your activities around 
these fluctuations will help ensure that you can meet monthly fixed costs (e.g. wages) when 
your income is not coming in regularly. By cash flow forecasting, you can also maximise 
interest earnings from investments by investing your money until it is required to pay for 
something. 

To prepare a cash flow forecast: 

use the budget (prepared above) and break it down month by month 
add in an opening bank balance and calculate a closing balance. 



Tip: For more information on budgeting and cash flow forecasting, see the Canterbury 
Not-For-Profit Forum's Business Plan Guidelines for Community Groups: http://groups. 
google.com/group/cantyforum/web/business-planning-for-not-for-profit-organisations 



Financial record-keeping 

Treasurer's roles and responsibilities 

The treasurer is the person on the board or committee who takes overall responsibility for 
the financial management of an organisation on behalf of its governing body. The amount 
of work involved for the treasurer will depend on the size and type of organisation, and on 
whether there is a staff member - such as a financial administrator - who can carry out 
some of the tasks. 

Checklist of treasurer's overall duties 

The treasurer carries out the following duties: 

sets up and oversees bank accounts on behalf of the organisation (most organisations have 
a cheque account, a savings account, and term deposits) 
ensures money received is receipted and banked promptly 
• invoices anyone who has purchased goods or services (rentals, use of equipment, 
membership fees etc) from the organisation 

make payments as required (see Checklist for making payments for more details) 
signs cheques on behalf of the organisation (at least one other person should co-sign 
the cheques) 

maintains accurate records of income and expenditure 
files GST and tax returns 

keeps an accurate wages book and makes PAYE payments as required (where there are 
paid employees) 

prepares annual budgets for the forthcoming year 

manages a cash flow record and also the organisation's investments e.g. term deposits and 
property management (in association with the committee) 



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Section 7: Financial management 3 



maintains an appropriate accountability system for grants received 
prepares and presents monthly financial reports for management meetings 
prepares accounts for auditing and provides information for the auditor as required 
prepares and presents the Annual Financial Report to the Annual General Meeting/Hui-a- 
Tau. 

To help perform these duties, the treasurer should have: 

a copy of the group's constitution (or rules) 

copies of previous annual financial accounts 

had a discussion with their predecessor to obtain any relevant information or advice 

had a discussion with the group's auditor (if there is one) on any issues that may need to be 

addressed in the operation of the group arising from the last audit and find out what's likely 

to be needed for the next audit (if the accounts are audited). 

Checklist for making payments 

When making payments, the treasurer should make sure that: 

all payments are made by cheque, direct debit or Internet transaction - the exception is for 
small items paid out of petty cash 
payments are on time 

there is a GST tax invoice before making payment - it's easier to get the supplier to issue 
a correct invoice if they haven't yet received the payment (see the sample of a GST tax 
invoice) 

all invoices are checked for accuracy before making payment - also check that the goods 
or services have been received (tick off items listed on the packing slip/invoice) and that they 
are satisfactory 

volunteers' out-of-pocket expenses are always paid promptly 
there are two cheque signatories and/or two authorising codes for Internet banking 
payments - this should be expressly included in the organisation's constitution 
* invoices are filed in orderly way, either by cheque number or date of payment. 



Tip: In small community organisations, the treasurer should prepare a list of payments 
made during the previous month and present them to the regular committee/board 
meeting for approval. If possible, the treasurer should also get future payments/ 
cheques approved at the meeting. Larger organisations will have established systems for 
controlling payments, often handled by a paid staff member. 



Financial records 

Many of the major problems for organisations arise from poor record-keeping of financial 
transactions. The treasurer must be able to provide documentary evidence of every 
transaction made in order to prove the validity of his or her records and, if an audit is 
required, to satisfy the auditor. 

The treasurer (and/or financial administrator) is responsible for maintaining the following 
records (dealt with in more detail below): 

subs or membership register (in the case of clubs) 
receipt book for monies received 



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Section 7: Financial management 4 



a file for keeping your income invoices and paid accounts 

petty cash book 

an accounting system (preferably a computerised package e.g. MYOB) to account 

for all transactions. 



Tip: Having a computerised accounting system can make things a lot easier, though it 
may not be possible for all organisations. You can use a cash book accounting system to 
keep track of your finances, either using a computer spreadsheet (e.g. Microsoft Excel) or 
a manual multi-column cash book (see later). 



The treasurer (and/or financial administrator) is also responsible for maintaining the following 
(which are dealt with in this section or other parts of this kit, as indicated): 

• financial statements i.e. statement of financial performance (profit and loss) and statement of 
financial position (balance sheet) - see Financial reporting 

• budgets - see Financial planning 
PAYE returns - see Tax matters 

GST returns and calculations - see Tax matters 

• funding applications - see Section 9 - Raising funds. 

Receipt book 

When cash is received, a receipt must be issued to the payer recording: 

• the date 
name of payer 
amount received 

• what the money is for (e.g. subscription, donation etc). 

Tip: People making a donation to your group of $5 or more can claim this as a tax 
deduction if: 

your group is registered with Inland Revenue as a donee organisation and 

• you have provided them with a receipt for the donation to include with their tax return. 

Filing income invoices and paid accounts 

file all income invoices in date order 

• write the cheque/payment number and date on all paid accounts and file in number order 
consider keeping a separate file for all Inland Revenue returns and statements (GST and 
PAYE). 

Petty cash book 

Petty cash is used to pay for small, miscellaneous items such as milk, pens, stamps or local 
travel expenses. Though they may seem small, petty cash expenses need to be recorded. 
Your group should set up a petty cash book (see later sample) and have a designated place 
to keep the money, e.g. a petty cash tin or purse. 

Petty cash checklist 

To start using your petty cash system: 

withdraw cash (or write out a cheque for cash), recording it as 'petty cash' 

keep petty cash in a separate secure place 

make sure you receive a receipt for each petty cash purchase 



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Section 7: Financial management 5 



record the purchase, with the type of expense, in a petty cash book (see sample) 
keep a running reconciled balance 

when your petty cash gets low, make another cash withdrawal to bring it back up to the 
original amount. 

Other things to remember are: 

* The withdrawal to start the petty cash system is not an 'expense' - it cannot be claimed for 
income tax and GST - it is just to open the petty cash book. This would be coded to your 
petty cash asset in the statement of financial position. 

The reimbursements will be for the amount spent and therefore will be coded accordingly 
and any GST claimed. 

* The petty cash book should be balanced at regular intervals. The balance in the petty cash 
will be the previous balance, plus any reimbursements, minus the receipts as listed. 
Reimbursements from petty cash are subject to audit along with the organisation's other 
financial systems. 

Any cash received by the group should be banked and not put into the petty cash. 



Sample petty cash book 

XYZ Community Group Inc Petty Cash book 



Date 


Details In Out 


Balance 


01/01/10 


Opening balance 




$50.00 




07/02/10 


Postshop - stamps 




$13.50 


$36.50 


07/02/10 


Stationery 




$8.80 


$27.70 


14/02/10 


Tea/milk 




$6.60 


$21.10 


21/02/10 


Postage 




$6.50 


$14.60 


21/02/10 


Milk, biscuits 




$6.40 


$8.20 


28/02/10 


Cheque 1 23 


$41.80 




$50.00 



Computerised accounting systems 

As mentioned earlier, a computerised accounting system is the best option for most 
organisations as it will allow you to manage your finances accurately and efficiently, and it 
will also make financial reporting and planning easier. 

There are many computerised accounting packages on the market, so you should be 
able to find one to suit the needs of your organisation. Choosing the right one is important 
and your group should do some research before you make the decision. Ask computer 
experts and sales people, and also check around to see what friends or colleagues in other 
organisations are using. 

Checklist for a computerised accounting system 

Features you need to consider are: 

• can the system calculate GST and allow you to allocate GST by individual transactions? 

• can it track funding or project spending? 

• can you produce a full set of financial accounts (profit and loss and balance sheet)? 
are you able to process journal entries (adjustments other than banking)? 



Community Resource Kit 



Section 7: Financial management 6 



is the system secure and user-friendly? (you can usually get a free trial package 
before you buy) 

Chart of accounts 

Once you have chosen your accounting package and installed it, you should set up your 
chart of accounts. This is a list of all types of income, expenditure, assets, liabilities and 
equity (see the following sample). 

Spend some time considering who will require information from you and what sort of 
information they will require. This will help you decide how detailed your chart of accounts 
needs to be. For example, a manager may need to know how much is spent on mobile 
phones versus landline phones. In that case, you would have two categories for telephone 
in your chart of accounts, whereas an organisation that does not need that level of 
information would only have one category for telephone accounts. 

Sample chart of accounts 



XYZ Community Group Inc. 


1-0000 


Assets 








1-1000 


Current Assets 








1-1110 


Cheque Account 






1-1120 


Savings Account 






1-1130 


Term Investment 






1-1140 


Petty Cash 






1-1200 


Accounts Receivable 




1 -2000 


Other Assets 








1-2100 


Prepayments 






1 -2200 


Deposits Paid 




1 -3000 


Fixed Assets 








1-3110 


Office Equipment at Cost 






1-3120 


Office Equipment Accum Dep'n 






1 -3200 


Computer Equipment at cost 






1-3210 


Computer Equipment Accum Dep'n 


2-0000 


Liabilities 








2-1000 


Current Liabilities 








2-1000 


Accounts Payable 






2-1100 


Unspent Grants 






2-1300 


GST 

2-1310 GST Collected 

2-1320 GST Output Tax Adjustment 

2-1330 GST Paid 


3-0000 


Equity 










3-1000 


Opening Retained Earnings 






3-9000 


Current Year Earnings 






3-9999 


Historical Balancing 


4-0000 


Income 








4-1000 


Grants 

4-1 100 Council 

Funding 

4-1200 Lotteries 





Community Resource Kit 



Section 7: Financial management 7 



4-2000 


Contracts 




4-21 00 Child Youth 




and Family 




4-2200 FACS 


4-3000 


Fundraising Income 


4-3100 


Market Day Income 


4-4000 


Subscriptions 




Received 


4-5000 


Interest Received 


4-6000 


Other Funding 


5-0000 Expenses 


5-1000 


ACC Levy 


5-1200 


Audit Fees 


5-1300 


Advertising 


5-1400 


Bank Charges 


5-1500 


Cleaning 


5-1600 


Depreciation 


5-1700 


Electricity 


5-1800 


Fundraising Expenses 




5-1820 Market Day 




Expenses 


5-1900 


Insurance 


5-2000 


Office Supplies 


5-2100 


Rent 


5-2200 


Subscriptions 


5-2300 


Telephone 


5-2400 


Travel 


5-2500 


Volunteer Expenses 


5-2600 


Wages & Salaries 



Opening balances 

If this is your first financial year you will have no opening balances to begin with. However, if 
you are changing to a new accounting system you will need to enter the opening balances 
from last year's balance sheet (i.e. last financial year's closing balances will become this 
year's opening balances). 

Names file 

Most accounting systems will require you to set up a name or card file for each person 
or organisation you have transactions with. Some systems allow you to add in contact 
details and notes, etc, which you may want to consider if this information is not recorded 
elsewhere. 

Processing transactions 

Most accounting systems work in the following two ways: 

1 . Processing your transactions direct from the bank statements as money in and 
money out. 

2. Entering in invoices to be paid and then processing the payment against the outstanding 
invoice (and vice versa for income). 



Community Resource Kit 



Section 7: Financial management 8 



The first option is quicker as each transaction is only handled once. However, the second 
option allows you to know how much money is outstanding and how much money is owed 
to you (creditors and debtors). You need to consider what is useful for your organisation 
compared with the extra administration time it takes. 

GST processing 

Most accounting systems will ask you to allocate GST (Goods and Services Tax) on each 
transaction. Some account codes will have a default GST code set up. The code should 
still be checked before recording. It is also important to check the tax invoice at the time 
you are entering the information into the system to see if it is a GST tax invoice or not (see 
sample on the next page). 

Sample GST invoice 

Example: Tax invoice for supplies worth more than $1000. 



ABC ELECTRONICS 



■flftnl 









TAX INVOICE-- 



TO itm F*»untf 

WfUWCiTDN 



QSTfluffllW «-?&«2 




TatMl inuiaitdiiB 




K.i-iin j- lrti5:S*"nt 

1 St4KAer'i GST 
ifrgrvjto" rti'nt*' 

D*m d tut* 

Uwna rd ndDTK2 a\ Pic 

' (KAMI 



supp : *d 



05T"!*i»?«d 



i Tatil wrawi p>>«j • 



Tip: It is important to check the GST status of any grants you receive. Some will have 
GST added while others will be exempt as they are donations. If you have any doubts, 
ring your funder to clarify. 



Community Resource Kit 



Section 7: Financial management 9 



Bank reconciliation 

It is important to reconcile your bank accounts at least monthly (see sample below). Most 
systems will have a separate function to reconcile the banking. Once this is completed, you 
can print off a bank reconciliation report to keep with the bank statements. 

Sample monthly bank reconciliation 

XYZ Community Group Inc. 
Bank Reconciliation for the Month Ended 28 February 2010 

Opening cash book balance as at 1 Feb 201 $ 550.00 

ADD total receipts for the month $ 41 31 .20 

$4681.20 

DEDUCT total payments for the month $ 402.20 

CASH BOOK BALANCE AS AT 28 FEB 201 (A) $ 4279.00 

Balance as per bank statement as at 28 Feb 201 $ 320.80 
DEDUCT unpresented cheques 
No 123 



$41.80 




$ 


$41.80 




$ 279.00 


$ 


$ 4000.00 


$ 





ADD outstanding deposits 

ADJUSTED BANK BALANCE AS AT 28 FEB 201 (B) $ 4279.00 

To be reconciled (A) must equal (B) 

Note: If the bank account and the cash book are in overdraft, the above instructions are 
changed as follows: ADD becomes DEDUCT and DEDUCT becomes ADD. 

Cash book accounting system 

While a computerised system makes financial recording and reporting easy, a cash book 
accounting system will work perfectly well for small community groups (especially ones that 
are not GST-registered). 

A cash book is a spreadsheet, either in a multi-column book or a computer file (see sample 
on following page). It records all financial transactions, keeps you financially up-to-date, and 
allows you to keep control over your finances. The cash book keeps track of receipts and 
payments. It tells you: 

• your current bank balance 

how much money has been paid into the bank 

• where the money came from 

what cheques have been paid out, to whom and for what 

• the total for the month or year for specific purposes e.g. rent 
the total for the month or year for all income and expenses. 



Community Resource Kit Section 7: Financial management 1 



Cash book checklist 

To operate a cash book: 

use a cash book with as many columns as you think you will need - in a manual system, a 
1 6-column book is best 

• start each month on a new page (or spreadsheet) 

• use the income and receipt columns that are most relevant to your organisation 
where possible, have separate columns for expenses that occur frequently 

• make sure you write (or enter) the cheque number or transaction code in the cash book - 
this makes it easier to reconcile with the bank statement 

if you are GST-registered, set up separate columns for GST paid and received (manual cash 

books are more appropriate for smaller groups that are not GST-registered) 

when you receive your bank statement, enter any automatic payments, bank fees or other 

items that appear on the bank statement 

add all the columns up at the end of the month and make sure the total of the 'income' 

columns equals 'receipts' and the total of the 'expenditure' columns equals 'payments'. 

Sample cash book 

This example is of a small community group (XYZ Community Group Inc) that is not 
registered for GST and has no paid staff. The group is using a manual cash book 
accounting system but the same methods can be applied to a computer spreadsheet. 



Community Resource Kit Section 7: Financial management 1 1 



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Tip: Balancing the cash book will double-check your figures. The 'expenditure' 
columns should add up to the 'payments' column and the 'income' columns should 
add up to the 'receipts' column. 



Financial reporting 

Monthly reporting 
Financial reports 

On a monthly basis, the treasurer should prepare the following two reports for his or her 
management committee or board (governing body): 

• statement of financial performance (profit and loss) showing income and expenditure 
statement of financial position (balance sheet) showing assets, liabilities and equity. 

These reports are for the month, but it is important to review the year-to-date position at 
the same time. In preparing these reports you should ensure that all the balances in the 
statement of financial position are correct (e.g. all bank accounts reconcile, unspent grant 
balances are correct, etc). Some balances will not be confirmed every month, e.g. fixed 
assets might be reconciled yearly. Check that these balances look reasonable, then review 
the transactions in the statement of financial performance. Most accounting systems allow 
you to easily go back to view and check the coding of each transaction. 

The statement of financial performance is best reviewed against the budget figures. Any 
significant difference between actual figures and the budget should be looked into. If there 
are discrepancies, it will be useful to add a commentary to the report so these matters can 
be addressed by the governing body. 



Community Resource Kit 



Section 7: Financial management 13 



A sample monthly financial report, typical of a small community organisation, 
is shown below: 

Sample monthly financial report 
XYZ Community Group Inc 

Monthly Financial Report for the Month of February 201 



Annual Budget 




Month (Feb) 


Year to Date 




Receipts: 






8000 


Grants 


4000.00 


7000.00 


1800 


Donations 


125.00 


1577.00 


200 


Other 


6.20 


314.55 


10,000 


Total Receipts 


4131.20 


8891.55 




Payments: 






2400 


Rent 


200.00 


2200.00 


500 


Power 


45.00 


425.00 


1000 


Phone 


100.00 


975.00 


500 


Office Supplies 


21.80 


445.80 


2400 


Volunteer Expenses 


12.40 


972.40 


2000 


Computer 




350.00 


300 


Postage/email 


20.00 




200 


Audit 






500 


Other/misc. 


3.00 


424.75 


9,800 


Total Payments 


402.20 


5792.95 


200 


Surplus/(deficit) 


3729.00 


3078.60 


800 


Add opening balance 


550.00 


800.40 


1000 


Cash book balance 
28 Feb 2006 


4279.00 


4279.00 


2000 


ADD: 








Savings/Deposit a/c 


2000 






DEDUCT: Unspent 


4000.00 






Grants: 








(Lottery Grant) 






3000 


Available Funds 


2279.00 





Other reports 

Other monthly reports may need to be generated depending on the organisation and 
the level of detail the management committee or board require, e.g. some may require 
a breakdown of grants received or details on a particular project, etc. Most accounting 
systems should be able to accommodate different requests and therefore it is important to 
get reports set up so the least amount of manual reporting is required. 



Community Resource Kit 



Section 7: Financial management 14 



Keeping track of grants 

Strict accountability is demanded of any organisation that receives a grant. Once again, 
you can set up a computerised accounting system to keep track of grants received and the 
expenditure against them (see the following samples). It is better to use your accounting 
system to track grants as the money is spent, rather than having to go back and account 
for it when the report is due. 

With a computerised accounting system: 

• most systems have a project or job number that can be set up for each grant 

when the grant is received and processed, you add that job number to the transaction and, 
as the money is spent, you can add the same job number to the expense transactions 
at any time you should be able to print a report to show how much of the grant has been 
spent, however, the person who is entering the data needs to know which grant the 
expenditure is coming from 

• some organisations use a stamp or cover sheet for invoices that include the job number on 
them so it can be properly entered 

some organisations choose to code all grants to the liabilities as 'unspent grants'. Then 
each month they print off the job report to see how much was spent. They then transfer the 
amount spent out of 'unspent grants in liabilities' and into their income. This helps give a 
more accurate statement of financial performance. 



Tip: Remember to check each grant to see if it has GST added or is exempt (e.g. in the 
case of a donation). See the Inland Revenue booklet Grants and subsidies IR249. 



Sample grants register 
XYZ Community Group Inc 



Grantee 


Purpose 


Opening 


Grants 


Spent 


Balance 






Balance 


Received 




Unspent 


Lottery (1) 


Wage subsidy 


4000 




4000 




COGS(1) 


Admin costs 


2000 




2000 




Council 


Youth programme 




4000 


3500 


500 


MSD 


Parent programme 




5000 


5000 




Community Trust 


Computer equipment 




4000 


4000 




JR McKenzie 


Newsletter/publicity 




2000 


1700 


300 


Lottery (2) 


Wages 




10000 


6200 


3800 


COGS (2) 


Admin 




3000 


2000 


1000 


Total 




6000 


28000 


28400 


5600 



Community Resource Kit 



Section 7: Financial management 15 



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Year-end financial statements 

The year-end process 

Once you have completed your normal monthly processing and reconciliations, you are 
ready to move on to the year-end process. During this process you are ensuring that all 
income and expenses for your financial year have been accounted for (regardless of whether 
you have paid or received money for them). You are also ensuring that both the statements 
of financial performance and position give a true and fair view of the financial year. 



Tip: The checklist below will give you guidelines on what needs to be done in the year- 
end process. This checklist can be used as both an internal record of what has been 
processed and can be useful to give to your auditor. 



Year-end checklist 

NB: This checklist is intended as a guide only 
Organisation's name 
Year ended 



Question 



General 



Comments 



Have all the bank accounts been reconciled? 

Have all investments balances been reconciled? 

Have all loans balances been reconciled? 

Have all debtors and creditors been accounted for (copies 
of invoices made for auditor)? 

Have all comparatives for income and expenditure been 
made and accounted for significant changes? 

Are tax returns required to be filed, if yes, have they been 
filed? 

Has the petty cash been reconciled? 

Has the opening retained earning been checked against last 
year's closing retained earnings? 

Has the current year's surplus/deficit transferred correctly 
from the profit and loss statement to the equity in the 
balance sheet? 

Does the balance sheet balance? 



Community Resource Kit 



Section 7: Financial management 1 7 



Income 




Has all interest received been recorded? 

Are you exempt from resident withholding tax (RWT)? If not, 
can you apply for an exemption? 

Have any unusual types of income been received (e.g. 
insurance)? 

Have all grants been accounted for? 

Have all unspent grants been calculated and 
accounted for? 

Have all outstanding fees been accounted for? 

Have all bad debts been accounted for? 




Expenditure 




Has the full year ACC levy been recorded? 

Has entertainment expenditure been recorded (does the 
50% deductible rule apply i.e. do you pay tax)? 

Have all legal and professional fees been checked for 
deductibility (e.g. non-deductible if relates to capital 
expenditure)? 

Have all repairs and maintenance been checked for any 
capital items (e.g. over $200)? 

Have all depreciation rates been checked? 

Have all new assets been added correctly and the correct 
pro-rata amount of depreciation claimed (i.e. claimed 
from month purchased) - include a copy of any assets 
purchased for auditor? 

Have any assets been sold or scrapped this year, if so have 
they been corrected accounted for in balance sheet and for 
depreciation (i.e. no depreciation in year of sale)? Is there 
any loss or profit on sale? 

Are there any private adjustments needed in respect of 
assets/depreciation? 

Has a full year's insurance been accounted for? 

Have 1 2 payments for power, phone and rent been 
accounted for? 





Community Resource Kit 



Section 7: Financial management 1 8 



GST 




Is the group registered for GST? 

If not registered, has the gross turnover exceeded the 
$60,000 (compulsory level)? 

If registered is it a voluntary registration? 

Has the correct basis of GST been used (e.g. payments or 
invoice)? 

Are all returns up-to-date and accounted for to Inland 
Revenue? 

Has GST been paid on all fringe benefits other than GST 
exempt ones? 

Has the GST on the non-deductible portion of 
entertainment been adjusted for? 

Has the correct amount of GST been accounted for in the 
balance sheet? 




Wages and PAYE 




Have all allowances been checked as to whether or not 
PAYE was required to be deducted? 

Has the status of any independent contractor been checked 
to ensure that the person is not in fact an employee subject 
to PAYE? 

Do the wages reconcile with the total reported to Inland 
Revenue and wage book, and to the ACC calculation? 

Has the relevant tax been deducted from those contractors 
that fall within the schedular payments regulations? 

If no tax on schedular payments has been deducted from 
contractors, has a certificate of exemption been sighted? 




Other 




Have you reconciled all items on the balance sheet? 

Have you reviewed all income and expense coding? 

Have any notified bequests been recorded? 

Are all minutes up to date, signed and ready to give to the 
auditor? 

Is a copy of your constitution available, in case the auditor 
requests it? 

Is your organisation liable for any fringe benefit tax (FBT)? 





Community Resource Kit 



Section 7: Financial management 19 



Reports Required 




Statement of financial position (balance sheet). 

Statement of financial performance (profit and loss). 

Statement of movements in equity (maybe incorporated in 
balance sheet). 

Notes to the accounts. 

General ledger. 

Trial balance. 




Checked by: 




Signature: 




Date: 





Annual financial accounts 

Every organisation should produce financial accounts each year. Often these will be for the 
year from 1 July to 30 June (in line with the Government's financial year). 

The annual financial accounts you will need to produce are: 

Statement of financial performance (profit and loss) - this shows the revenue and 
expenses of the organisation over a certain period of time. If you subtract the expenses from 
the revenue you get the 'net profit' or 'net loss' at the bottom of the statement. Sometimes 
organisations carry a net loss over a period of time (e.g. when waiting for a large grant to 
come in) but any risks associated with this should be noted. 

Statement of financial position (balance sheet) - this lists all the assets and liabilities at a 
certain point in time. The basic rule is that the total assets should equal the total liabilities. 
You should be sure that, if you wound up operations tomorrow, you wouldn't be left with 
any outstanding debts you couldn't pay. In this way a balance sheet is a good financial 
'health check'. 

Depending on the size of the group, the annual accounts may also include additional notes 
and schedules that explain aspects of the accounts in more detail. 



Tip: The annual accounts are often prepared by the treasurer (or financial administrator), 
possibly with the help or advice from an accountant or the auditor. It is important that the 
rest of the committee or board also understand what the accounts say. This may mean 
enrolling in a basic accounting course. 



Auditing 

Auditing is the process of independently reviewing and checking that the year-end 
financial statements present a true and fair view of the financial activities for that year. The 
requirement for an auditor will be determined by the rules (or constitution or trust deed) of 
your organisation. Some funding bodies may also require your financial statements to be 
audited. 



Community Resource Kit 



Section 7: Financial management 20 



Different levels of audit 

There are several levels of audit and 'financial review' that might be appropriate for 
community groups: 

1 . Audit by a chartered accountant with a certificate of public practice. This is generally a 
full audit that can be quite expensive. Some funders require this level of audit, or it may 
be set out in your rules. In general, most smaller and medium community organisations 
will not need this degree of audit. 

2. Audit by an accountant without a certificate of public practice e.g. a retired accountant 
or 'accounting technician'. 

3. A 'review engagement' by a qualified accountant. This is less than a full audit, but 
provides a degree of independent assurance to the accounts. 

4. 'Independent verification' by someone who is independent of the group and has a 
reasonable understanding of accounting, such as a bank manager. Some funders (such 
as the Lottery Grants Board or the Community Organisation Grants Scheme) require this 
for smaller groups. 

If your rules or constitution don't specify the audit requirements, independent verification 
(audit level 4) will be sufficient for smaller community groups (i.e. less than $60,000 total 
annual turnover). For community groups over this level (i.e. needing to be GST-registered 
and employing staff), it is preferable to get a 'review engagement' (audit level 3) or audit by 
an accountant (audit level 2). A full audit by a chartered accountant (audit level 1) is only 
recommended for larger organisations (this is generally beyond the scope of this kit). 



Tip: For more information on auditing, visit the NZ Institute of Chartered Accountants 
website - http://www.nzica.com/AM/Template.cfm?Section=Audit_and_Assurance . 



What your auditor will require 

Your auditor will need the following (but note that this list is not exhaustive so check with 
your auditor): 

copy of your draft accounts - statement of financial performance, statement of financial 
position and notes to the accounts 
• cash book in the case of a manual/spreadsheet-based system 
all invoices and receipts, bank statements 
all cheque, deposit and receipt books 
trial balance 

general ledger for all accounts for the whole year 
all work papers used in the preparation of the accounts 
all reconciliations of assets and liabilities 
fixed asset schedule. 



Tip: Ensuring your auditor has a completed set of financial statements, with well recorded 
and filed data, will help minimise the audit cost. 



Community Resource Kit 



Section 7: Financial management 21 



Annual returns and financial statements 

Registered with the Charities Commission 

The Chanties Act 2005 requires all registered charitable entities (organisations registered 
with the Charities Commission after 1 February 2007) to submit an annual return to the 
Charities Commission. That annual return will outline their charitable purpose and activities 
and provide basic financial data, such as an organisation's income, outgoings and net 
worth. This means: 

Incorporated societies that are registered with the Charities Commission have to file an 

annual return with the Charities Commission instead of filing an annual return and financial 

statements with the Registrar of Incorporated Societies. 

Incorporated charitable trusts and unincorporated groups that are registered with the 

Charities Commission have to file an annual return with the Charities Commission. 

Companies and other groups (e.g. co-operatives) that are registered with the Charities 

Commission have to file an annual return with the Charities Commission as well as filing any 

other annual returns (e.g. with the Companies Office). 

Annual returns can be filed online or on paper and they must be received by the Charities 

Commission within six months of the end of the charity's financial year. 

Accounts do not need to be audited for the Charities Commission. If your accounts are 

audited, you are asked to provide these. If your accounts are not audited, you are asked to 

provide your non-audited accounts. 

Failure to provide an annual return could lead to a charity's de-registration with the Charities 

Commission. 



Tip: For further details on Charities Commission requirements visit: http://www.charities. 
govt.nz . 



Not registered with the Charities Commission 

Incorporated societies 

Under the Incorporated Societies Act 1908, every incorporated society must file a certified 
copy of its annual financial statement with the Registrar of Incorporated Societies. The 
annual financial statement will include the income and expenditure of the society for the 
previous financial year and the assets and liabilities, mortgages and secured loans affecting 
the society's property as at the end of the financial year. The accounts do not need to be 
audited unless the rules of the society specify this. 

Annual financial statements can be filed online at: http://www.societies.govt.nz or a paper 
form can be downloaded and filed. 



Tip: Make sure you file an annual financial statement. Failure to do so may mean you are 
struck off the Incorporated Societies Register. 



Charitable trusts 

Trusts and societies registered under the Charitable Trusts Act 1 957 that are NOT 
registered with the Charities Commission, do not have to file annual returns. 



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Section 7: Financial management 22 



Tip: For more information on filing annual returns and financial reporting requirements, 
refer to: 

• Societies and Trusts Online - http://www.societies.govt.nz 

• Keeping it Legal - E Ai Ki Te Ture - http://www.keepingitlegal.net.nz 

• New Zealand Institute of Chartered Accountants - http://www.nzica.com/AM/ 
Template.cfm?Section=Not_for_Profit_Sector 



Tax matters 

Managing tax matters can be complicated and will be quite specific to different types of 
organisations. This section provides some basic tips on managing your tax responsibilities, 
but we strongly advise you to talk to an accountant or refer to the detailed information 
available from Inland Revenue's website: http://www.ird.govt.nz . 

Checklist of tax responsibilities 

Here are some of the basic tax responsibilities most groups will have: 

You'll need to get an Inland Revenue (IRD) number if you don't already have one. 
Unless you are exempt from income tax, you will need to: 

complete an income tax return (the actual type varies depending on your legal structure) 
pay income tax on your net income 

pay resident withholding tax (RWT) on interest and dividends received 
• complete fringe benefit tax (FBT) returns and pay fringe benefit tax (if applicable) 
possibly pay provisional tax during the year. 

Register for Goods and Services Tax (GST) if your income is over $60,000. If you are GST- 
registered, you need to complete GST returns and pay GST to Inland Revenue. 
If you're an employer, you will have to deduct PAYE, and may need to deduct student loan 
repayments, child support payments and KiwiSaver, and pay all of these to Inland Revenue. 



Tip: The New Zealand tax system relies on people meeting their tax responsibilities 
voluntarily but there are penalties if you don't comply. Contact Inland Revenue for more 
information. 



Getting an Inland Revenue (IRD) number 

Complete an IR596 form and send it to Inland Revenue, together with your certificate of 
incorporation or trust deed (for charitable trusts). 

Tip: Contact Inland Revenue on freephone 0800 377 774 if you need further help. 
Once you've been issued with an IRD number, remember to use it in all your dealings 
with Inland Revenue. 



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Section 7: Financial management 23 



Income tax obligations 

The following community organisations are liable for income tax on their taxable income: 

those operating without written rules or a constitution 

• those operating under a set of rules or a constitution that does not meet the requirements 
for a specific exemption 

• those non-profit bodies entitled to the $1 000 deduction but whose income is more than 
$1000. 



Tip: The correct tax return form to use depends on your type of organisation. Refer 
to Inland Revenue for the correct forms for your organisation. Note: most community 
groups that need to complete an income tax return will use an IR9 return (for clubs and 
societies). 



Exemptions from income tax 

There are a number of income tax exemptions that an organisation may be entitled to. To 
qualify, the organisation must meet the specific requirements of the particular exemption it is 
claiming. 

The following organisations are allowed tax exemptions under income tax law: 

charities 

amateur game or sports promoters 

district improvement promoters 

friendly societies 

herd improvement promoters 

racing clubs 

scientific or industrial research promoters 

• veterinary services promoters 

• community trusts 

licensed non-casino gaming machine operators. 

Unless a group gains an exemption from Inland Revenue, it may be liable for income 
tax on its earnings (i.e. the profit it makes). A deduction of up to $1 000 per year from 
an organisation's net income is available for some non-profit groups, which reduces the 
amount of tax they need to pay. 



Tip: For more information on the various tax exemptions available to different types of 
organisations refer to IR255 Charitable organisations: a tax guide for charities, donee 
organisations and other groups, available from Inland Revenue's website (www.ird.govt. 
nz) or by calling them on 0800 377 774. 



Resident withholding tax (RWT) 

Money held in the bank or a financial institution is taxed on the interest it earns before 
payment. An organisation that is exempt from income tax is generally eligible for a certificate 
of exemption from RWT. 



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Section 7: Financial management 24 



You need to complete an Application for exemption from resident withholding tax on 
interest and dividends (IR451) form and send it to Inland Revenue in order to obtain a 
certificate of exemption. 



Tip: You can take a copy of your exemption certificate to the bank to make sure that they 
don't deduct tax. If RWT has been incorrectly deducted, then you can apply for a refund 
on an IR454 Resident Withholding Tax (Refund Request) form. 



Employment-related tax obligations 

Registering as an employer 

As soon as you start employing people, you must register with Inland Revenue. If you know 
in advance that someone will start working for you, you can register before they actually 
begin work. 



Tip: To register as an employer, fill in the Employer registration (IR334) form and send it to 
one of the addresses listed on that form. If you prefer, you can register online at: http:// 
www.ird.govt.nz . 



Deductions 

As an employer, you must make deductions from payments you make to people who work 
for you and pay these deductions to Inland Revenue. The types of deductions you may 
need to make are: 

PAYE (pay as you earn) 
student loan and child support 
FBT (fringe benefit tax) 
KiwiSaver 
Payroll giving. 

PAYE 

PAYE (pay as you earn) is the basic tax you take out of your employees' wages whenever 
you pay them. PAYE includes the Accident Compensation Corporation (ACC) earners' levy. 

Your employees must complete a tax code declaration (IR330) form as soon as they start 
work for you. This IR330 explains how to work out the correct tax code. The amount of 
PAYE you deduct depends on this tax code. Inland Revenue will send you a copy of the tax 
tables so you can work out the amount of PAYE to deduct for each tax code. 

If the net pay is to be the same every pay period, you can obtain an automatic payment 
authority from your organisation's bank and make a direct credit into the employee's account. 

Monthly PAYE reconciliation 

Each month, Inland Revenue requires you to fill out an employer monthly schedule (IR348), 
which they will automatically forward to you, together with the pay-in slip (IR345), when you 
register as an employer. On the schedule, you need to enter monthly gross earnings, PAYE 
deductions and student loan and child support deductions for all your employees. This 
information, along with a cheque covering the monthly PAYE deductions, must reach Inland 
Revenue before the 20th of each month. 



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Section 7: Financial management 25 



Alternatively, employers can file their employer monthly schedule (IR348) electronically, 
which is a fast and efficient way of doing things. For more information, see Inland Revenue's 
quick reference two-page summary sheet Ir-File - electronic filing for employers (IR31 7). 
This is available from Inland Revenue's website: http://www.ird.govt.nz , or by calling their 
INFOexpress line on free phone 0800 2570 773. 

If your PAYE deductions are more than $500,000 a year, you are considered to be a 'large 
employer' and must pay your PAYE deductions twice a month. You must also file your 
IR348 electronically. If this applies to you, contact Inland Revenue for more information. 



Tip: Remember there is a $250 (plus interest) fee for late filing of PAYE returns. Even if you 
have a nil monthly schedule, you still need to file it on time (i.e. by the 20th of the month 
following wage payment). 



Student loan and child support deductions 

As well as deducting PAYE, you may need to make deductions for student loans and/or 
child support, depending on your employees' circumstances. Some of your employees may 
need to make repayments to Inland Revenue for a student loan. They will use a student loan 
tax code on their tax code declaration (IR330) form. The PAYE deduction tables also show 
the amount of student loan repayment to deduct as well as the amount of PAYE, based on 
your employees' tax code. 



Tip: If you are required to make child support deductions for an employee, Inland Revenue 
Child Support will send you a child support deduction notice telling you how much to 
deduct. Visit: http://www.ird.govt.nz/childsupport/ for more details. 



Fringe benefit tax (FBT) 

Fringe benefit tax is payable on any fringe (i.e. non-cash) benefits provided by the employer 
to the employee e.g. motor vehicles, low-interest loans, etc. 

Charitable organisations that are exempt from paying income tax may also be exempt 
from paying FBT on any benefits provided to employees while they are carrying out the 
organisation's charitable activities. For example, if an employee has the use of a car while 
carrying out charitable work for the organisation, any private benefit arising is not subject to 
FBT. However, if the organisation provides a car as part of a salary package or for use with 
its business activities, FBT must be charged on any private benefit. 



Tip: You may also be eligible for other exemptions from paying FBT. Refer to the 
publication IR255 Charitable organisations: a tax guide for charities, donee organisations 
and other groups which can be obtained from Inland Revenue's website - http://www.ird. 
govt.nz . 



KiwiSaver 

KiwiSaver is a voluntary, work-based savings initiative to help individuals save for their 
retirement. As an employer, you will play an important role in helping your employees save 
with KiwiSaver. KiwiSaver has been designed to use your existing payroll process and 
minimise any extra work for you. 



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Section 7: Financial management 26 



Your main roles in KiwiSaver are to: 

check whether new employees are eligible to join KiwiSaver 

• check whether new employees should be automatically enrolled 
give the KiwiSaver employee information pack (KS3) to: 

• new employees who qualify for automatic enrolment, and 

• existing employees who want to opt in 
automatically enrol all new employees who are eligible 
provide information to IRD about: 

• all new employees who are automatically enrolled, and 

• eligible employees who have opted in to KiwiSaver 

• provide new employees with a written statement if you have an employer-chosen scheme, 
and also that scheme's investment statement 

deduct KiwiSaver contributions and make compulsory employer contributions (from 1 April 

2008) at the correct rate and forward them to IRD by the due date along with your PAYE 

payments 

act on opt-out and contributions holiday requests 

• stop or start deductions when IRD advises you to 

contact IRD when you require more KiwiSaver employee information packs (KS3). 



Tip: For further information, visit: http://www.kiwisaver.govt.nz/ 



Payroll giving 

Payroll giving is a scheme that gives employees the opportunity to donate to an approved 
donee organisation direct from their pay and receive an immediate tax credit for payroll 
donations. If you're an employer and file your IR348 and IR345 electronically using ir-File, 
you can choose to offer payroll giving to your employees. You'll need to: 

deduct the requested donation amount from the individual employee's salary or wage 
* calculate the correct tax credits for payroll donations for each donation made 
record the tax credits for payroll donations for individual employees on the employer monthly 
schedule (IR348) 

keep records of all tax credits for payroll donations, donation amounts, donee organisations 
and payment dates 

pass the donations to the chosen donee organisations within the specified timeframe of the 
deduction being made from the employee's salary or wage 
advise the donee organisation the donation is a result of payroll giving. 



Tip: For further information, including the list of of approved donee organisations, visit: 
http://www.ird.govt.nz/ . 



Goods and services tax (GST) 

GST is a tax on consumption of most goods and services in New Zealand. GST is currently 
charged at 1 5 per cent of the value of the goods or services provided. It is a separate tax 
from income tax. 



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Section 7: Financial management 27 



Taxable activities 

A taxable activity is any activity carried on continuously or regularly by a business, trade, 
manufacturer, professional person, association or club. It includes any activity that supplies, 
or intends to supply, goods and services to someone else for a consideration (e.g. money, 
compensation, reward), but not necessarily for profit. 

Taxable activities do not include: 

working for salary or wages 

being a company director 

making exempt supplies (e.g. renting out property as a private dwelling, interest you receive, 

the sale of donated goods and services by a non-profit body, financial services). 

Who must register? 

If an organisation's annual income for taxable activities was over $60,000 for the past 1 2 
months or expects to be in the next 1 2 months, it must register for GST. If your income 
is less than $60,000, you can choose to register. For some voluntary organisations being 
registered will be an advantage because you will be able to claim back the GST you have 
paid on goods and services the organisation has used. However, you should remember that 
if you decide to cancel your registration, you will have to pay GST on the assessed value of 
your assets at the time of cancellation. 

Registering for GST 

You can register for GST by completing a GST Registration (IR360) form and returning it to 
Inland Revenue. GST registration can be done online through Inland Revenue's website - 
http://www.ird.govt.nz . 

Inland Revenue will then send you notification of your registration which will show your: 

registration number (which is usually the same as your IRD number) 

date of registration 

taxable period (one, two or six months), your accounting basis and the date your first GST 

return is due. 



Tip: Make sure that your GST periods are in line with your year-end balance date e.g. if 
you have a June balance date, ensure that one of your GST periods ends in June. 



GST obligations 

It is very important that you are aware of what you need to do as a GST-registered 
organisation - there are hefty penalties if you don't comply with the regulations. In general, 
all organisations registered for GST must: 

charge and collect GST on behalf of the Government 
file GST returns. 

Checklist of GST obligations 

Organisations registered for GST should note that: 

Goods and services supplied must have GST added to them and be on a GST tax invoice. 
Assets sold must have GST added. 



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Section 7: Financial management 28 



To claim back the GST you have paid on goods and services, a GST tax invoice must be 

obtained for all amounts over $50. However there are some payments that you do not 

generally pay GST on e.g. wages and PAYE; bank charges and interest; koha and donations 

(where the donor receives no service or otherwise gets no benefit); money received from the 

sale of donated goods, etc. 

You must give tax invoices to GST-registered persons/organisations within 28 days. 

A GST tax invoice is a legal document and must meet certain requirements (see the sample 

earlier in this section) 

GST returns must be filed every one, two or six months (known as your taxable period). 

You can choose the taxable period that best suits your organisation. When making your 

selection look at how much time it takes to prepare and also the timing of when you receive 

GST income and when you pay GST payments. 

You must select which basis you will be using to account for GST. You have the choice of: 

• invoice (or accruals) basis - you claim GST when you receive an invoice and account for 
GST when you receive an invoice or receive a payment, whichever comes first 

• payments (or cash) basis - where you account for GST when you pay or receive money 

• hybrid basis - a combination of the invoice and payments methods. 
All GST records and documents must be kept for seven years. 

Every GST-registered organisation is open to being audited by Inland Revenue. 

Completing your GST return 

During the final week of your selected taxable period (one-, two- or six-months), Inland 
Revenue will automatically send you a GST Return (GST1 01) form for you to complete and 
send back to them by the due date on the form. 

Some useful basic tips on calculating GST are: 

to calculate the GST on a GST-exclusive amount - multiply by 1 5 per cent 
if you have the GST-inclusive amount and want the GST amount - multiply by 3 and divide 
by 23 

if you have the GST amount and want the GST-inclusive amount - multiply by 23 and divide 
by 3) 
• If you have the GST-inclusive amount and you want the GST-exclusive amount - multiply by 
3 and divide by 23, then deduct this amount from the GST-inclusive amount) 

Keep in mind that you must still send your GST return to Inland Revenue even if it's a nil one 
(i.e. there is no refund owing or tax to pay) otherwise Inland Revenue will produce a default 
assessment based on previous returns and charge you accordingly. 



Tip: To find out details on how to calculate your GST (in order to complete your GST 
return) and how to pay GST or receive a GST refund, visit: http://www.ird.govt.nz/gst/ or 
refer to the Completing your GST return section of Inland Revenue's booklet GST Guide 
(IR375). Alternatively you can contact Inland Revenue's business tax information service 
on free phone 0800 377 774. 



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Section 7: Financial management 29 



Accident Compensation Corporation (ACC) 

ACC employers' levy 

Employers are required to pay ACC to cover work-related accidents on behalf of their 
employees. The levy is based on the organisation's gross wages paid multiplied by the 
industry rate. If you are an employer and have not received an invoice from the ACC, you 
will need to contact ACC directly. 



Tip: Ensure you check the gross wages used by the ACC in their calculations and 
remember there is GST charged on all ACC employers' levies. 



ACC earners' levy 

In addition to ACC employers' levies, all employees must pay an ACC earners' levy to cover 
the cost of non-work-related injuries. Inland Revenue collects this on behalf of the Accident 
Compensation Corporation. 

For employees, this levy has been built into the PAYE tables and is deducted along with 
their PAYE. This means that no extra calculations are needed for it in each pay period. 



Tip: For further information on ACC earners' levy, visit: http://www.acc.co.nz or contact 
ACC on free phone 0800 222 776. You can also contact Inland Revenue's Employer 
Enquiries on free phone 0800 377 772 or refer to their website - http://www.ird.govt.nz . 



Where to go for more information 

Online resources 

1 . NZ Institute of Chartered Accountants - Not-for-profit sector - http://www.nzica. 
com/AM/Template.cfm?Section=Not_for_Profit_Sector . Information on financial 
management, financial reporting, auditing and other matters. Also see their NFP 
Financial Reporting Guide - http://www.nzica.com/AMATemplate.cfm?Section=Not_ 
for_Profit_Financial_Reporting_Guide_and_Disclosure_Checklist&Template=/CIW 
HTMLDisplay.cfm&ContentlD=1 1 1 78 . 

2. Keeping it Legal - E Ai Ki Te Ture - http://keepingitlegal.net.nz/learn-more/ . Legal and 
taxation information. 

3. CommunityNet Aotearoa Finance How-to Guide - http://www.community.net.nz/ 
how-toguides/finance/ . Resources and information on financial management and 
preparing budgets. 

4. SPARC'S Club Kit - Financial management - http://www.sparc.org.nz/en-nz/ 
communities-and-clubs/Toolkit-for-Clubs/Running-your-Club/Financial-management/ . 
Information on the financial processes a club needs to run successfully. 

5. Hutt City Council's Good Practice Guidelines - http://www.huttcity.govt.nz/ 
Council-Services/Community-Development/Good-Practice-Guidelines/ . See Section 7: 
Managing the money. 

6. Business Plan Guidelines for Not-For-Profit Organisations - Canterbury Not-For- 
Profit Forum - http://groups.google.com/group/cantyforum/web/business-planning-for- 
not-for-profit-organisations . A business planning guide with information and samples. 
The forum website also has other financial templates. 



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Section 7: Financial management 30 



7. Inland Revenue Department- http://www.ird.govt.nz/non-profit/ . Information non- 
profit organisations' tax responsibilities and obligations. 

8. Societies and Trusts Online - http://www.societies.govt.nz/ . Information about 
Incorporated Societies and Charitable Trusts and their financial requirements. 

9. Charities Commission - http://www.charities.govt.nz . 

10. ACC - http://www.acc.co.nz . Further information on ACC levies. 

1 1 . KiwiSaver - http://www.kiwisaver.govt.nz/ . Further information on the KiwiSaver 
savings initiative. 

12. Companies Office - http://www.business.govt.nz/companies/ . Information on 
company annual returns and financial reporting requirements. 

13. Financial Help Sheets and Resources - Our Community (AUS) - http://www. 
ourcommunity.com.au/financial/financial_article.jsp?articleld=2205 . Resources to help 
community groups manage their finances. 

14. Free Management Library's Basic Guide to Non-Profit Financial Management (US) 
- http://managementhelp.Org/finance/np_fnce/np_fnce.htm#anchor1317862 . Covers 
the basics of financial management, and how to build the basic systems and practices 
needed in a healthy organisation. 

15. Sorted - Budgeting - http://www.sorted.org.nz/home/sorted-sections/budgeting . 
Information on budgeting, with helpful online calculators. 

Other resources 

1 . Inland Revenue has a number of useful guides on tax and financial matters. A few of 
the more useful ones on tax and financial matters include: 

Charitable organisations: a tax guide for charities, donee organisations and other 
groups (IR255) 

First-time employer's guide: information you'll need if you're thinking of taking on 
staff for the first time (IR333) 

Employer's guide: information to help fulfill your responsibilities as an 
employer (IR335) 

GST guide: working with GST (IR375) 

GST - do you need to register? (IR365) 

Ir-File - electronic filing for employers (IR31 7) 

Smart business: A guide for businesses and non-profit organisations (IR320). 

2. North Shore Community and Social Services' Community Resources: 

The Treasurer's Resource Manual- covers the Treasurer's Role, Financial Record- 
keeping, Budgets, Legal Responsibilities and also has an extensive glossary. 

Being a Good Employer- provides useful information on the legal requirements and 
expectations of employers and employees. 



Community Resource Kit Section 7: Financial management 31